Social Shopping Centres

27 September 2017

A broad entertainment offer and high-quality restaurants count for more than proximity to a shopping centre or an attractively-priced F&B offer, reveals a survey of shopping centre customers carried out by real estate advisory firm Savills in collaboration with NEUROHM. Changing consumer needs have led to the emergence of a new generation of retail schemes on the market: social shopping centres.

What is a social shopping centre?

According to Savills latest report, a social shopping centre is defined as a scheme whose retail function is not superior to its additional services. That superiority need not be associated with a larger volume of space occupied by non-traditional retailers, but needs to be reflected in the overall image and market positioning of a shopping centre. A social shopping centre supports social interaction and customer experience. It is frequently located at a post-industrial site and usually offers a public space with greenery. Social shopping centres include local brands and unique concepts of leading retailers, providing services and products with no alternative online presence.

Marta Mikołajczyk-Pyrć, Head of Retail Property Management, Property & Asset Management at Savills, said: “Social shopping centres are primarily leisure destinations and have evolved in response to the growth of e-commerce. Such schemes offer services unavailable in the online channel.”

Recent social and real estate market changes have been instrumental in the development of social shopping centres. The F&B sector has gone a long way since the first McDonald’s restaurant was opened in Warsaw in 1992, through the popularity of television cooking programmes, the first Michelin-starred restaurant in Poland and the opening of Warsaw’s first food market. New technologies have developed in parallel. In addition, the abolition of border controls in the Schengen Area helped Western trends edge their way into Poland.

Jarosław Tutaj, Head of Retail Agency, Savills, said: “The opening of Hala Koszyki has been the most pivotal event on the Polish retail market since the Galeria Mokotów shopping centre was delivered to the market in 2000. Although the two schemes are incomparable in terms of size, they have become ‘role models’ for others. Everything changed on the market in the span of sixteen years between the openings of the two: the expansion of multiplexes and fitness clubs, preoccupation with healthy eating, smartphones and the growing popularity of social media. All that has changed the way we shop and what we expect of modern shopping centres. Traditional retailing had to find a way to respond to current consumer needs. That’s the background to the origin of social shopping centres.”

Does Poland have social shopping centres?

According to Savills, Poznań’s Stary Browar is a precursor of social shopping centres in Poland. It was opened in 2003, combining retail and arts. Many existing retail schemes have been recently refurbished in an attempt to turn them into social shopping centres. These include Arkadia and Galeria Mokotów, which have expanded their food courts.

Hala Koszyki in Warsaw is Poland’s first fully-fledged social shopping centre with bars and other catering establishments located in its central zone. One of its restaurants is open 24 hours a day, making it a vibrant complex also at night. Many planned mixed-use schemes offering offices, apartments and retail will have attributes of a typical social shopping centre, including Browary Warszawskie, Elektrownia Powiśle (EC Powiśle) and Towarowa 22.

Wioleta Wojtczak, Head of Research at Savills, said: “Retail schemes having many attributes of a social shopping centre currently account for less than 10% of Poland’s total retail stock. Food courts and entertainment zones occupy a small percentage of space at most of the country’s 430 shopping centres.”

According to Savills data, Poland’s eighteen largest cities with more than 150,000 inhabitants have a total of 400 shopping centres with approximately 765 F&B tenants operating nearly 2,100 outlets. The F&B offer currently accounts for around 5% of a shopping centre’s total leasable area. The recommended level is 20%, but some shopping centres such as Hala Gwardii will be fully let to F&B operators. These cities also have approximately 210 entertainment operators leasing more than 400 premises.

What do customers really expect?

NEUROHM, in cooperation with Savills, conducted a survey of more than 1,000 shopping centre customers for the report, applying a unique methodology to analyse not only customers’ responses, but also the time they took to provide answers. This enabled NEUROHM to measure the emotional certainty of their attitudes.

Paulina Poławska, Project Coordinator, Analysis Department, NEUROHM, said: “Our research shows that purely emotional aspects rather than a rational retail offer or a list of useful functionalities are more important to Polish people in defining a favourite shopping centre.”

88% of the respondents declared that an ideal shopping centre should make them feel good. The same percentage also agreed with the attribute: “Is close to where my friends and I live”. Based on these responses, it would be logical to assume that both attributes are equally important. However, analysis of response times reveals a spectacular difference: 60% of the respondents cited the attribute “Makes me feel good” without any hesitation while the score for the latter was barely 39%. This means that according to present-day consumers only the former factor is a true attribute of an ideal shopping centre.

The survey shows that essential attributes of an ideal shopping centre include: a broad entertainment offer and high-rated restaurants. In addition, such a retail scheme should guarantee a positive customer experience, host cultural events and fit in with customers’ lifestyles. An inexpensive F&B offer and close proximity are classified as seemingly important.

What will the retail market be like in the future?

Social shopping centres are a much more complex concept than traditional shopping centres and associated with many challenges for property managers who need to act a lot more proactively. Such retail schemes are also at risk of changing fads and preferences of large city customers. A property manager must therefore ensure that customers get what they expect.

New-generation shopping centres are a relatively new product on the real estate investment market, making long-term analyses of their performance impossible. In addition, the preference of leisure and F&B operators for turnover-based rents is another risk factor. Investors, however, cannot ignore market changes underway and will certainly keep a close eye on top-performing new-generation shopping centres which are likely to soon become sought-after investment assets.

“We will see few large shopping centre openings in upcoming years. Those delivered to the market will move away from traditional retailing or will combine it with new functions to improve footfall and compete with online sales channels. They will, however, require a successful commercialization strategy incorporating unique brands and concepts. We should remember that the Polish market has a limited capacity to absorb such retail schemes” said Jarosław Tutaj, Savills.